Imperfect competition and congestion in the City

This paper presents a model to study the interplay of imperfect competition and congestion. Residents live in the city center while they shop and work in subcenters (shopping centers, airports, etc.). Each subcenter offers one differentiated product and one differentiated workplace. Shopping and commuting from the city center to the subcenter requires the use of transport infrastructure that can be congested. We derive the Nash equilibrium in prices and in wages and analyze the welfare impacts of congestion charging and infrastructure policies. We generalize the literature on imperfect competition with (spatially) differentiated products in the presence of (un) priced congestion.